DOE pegs $750M for Renewable Energy Loan Guarantees

The Department of Energy is launching a new loan guarantee program that will provide $750 million in Recovery Act spending as seed money designed to accelerate the development of conventional renewable energy projects.

At that level of funding, the loan guarantees could support as much as $4 to $8 billion in lending to eligible projects, according to DOE’s announcement.

The department also says it will invite private sector participation to accelerate the financing of the renewable energy projects.

To make this happen it has created the Financial Institution Partnership Program, or FIPP, which it describes as a “streamlined set of standards designed to expedite DOE’s loan guarantee underwriting process and leverage private sector expertise and capital for the efficient and prudent funding of eligible projects.” Eligible projects include hydropower, wind power, geothermal, solar, biomass, and trash-to-energy.

On Thursday (Oct. 22) the department has scheduled a webinar to “help companies navigate the process of applying for loan guarantees” under FIPP. During the webinar, scheduled to begin at 12 p.m. eastern time, the DOE’s Douglas Schultz will address questions and concerns regarding the new program. Click here to register.

DOE Secretary Steven Chu says that American innovation “can be the catalyst that jump starts a new clean energy Industrial Revolution.”

“Past solicitations for renewable energy generation projects have focused on loan guarantee applications using new or innovative technologies not in general use in the marketplace,” the department explained.

FIPP’s goal is to “leverage the human and financial capital of private sector financial institutions by accelerating the loan application process while balancing risk between DOE and private sector partners partcipating in the program.”

Under the first FIPP solicitation proposed borrowers and project sponsors will not apply directly to DOE but instead work with financial institutions that satisfy the qualifications of what constitutes an eligle lender. The lender then applies directly to DOE to access the loan guarantee.

The guarantee percentage will be no more than 80 percent of the maximum aggregate principle and interest during the loan term and the project debt must have a credit rating of at least ‘BB’ or the equivalent with a nationally recognized credit rating agency.

The Recovery Act created a new Section 1705 under Title XVII of the Energy Policy Act of 2005 for the rapid deployment of renewable energy projects and related manufacturing facilities, electric power transmission projects and “leading edge” biofuels projects that begin construction prior to September 30, 2011.

FIPP expands on that to include the other conventional renewable energy components.